Chapter 6. International Relations Notes for UPSC Mains

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China

Search Indian Express – China new silk road hits 14 billion $ pothole in Pakistan

Salami Slicing

  • A strategic approach by China
  • In which China makes small but steady inroads into another territory, which is enough to expand its foothold without aggrevating the situation in a war
  • Eg – Doklam crisis

Doklam Valley crisis

  • Victory for India – Both soldiers removed troops
    • Tangible Impact
      • ASEAN countries – Republic Day
      • Maldives – China says 0 We don’t want another Dokalm. Hence talking with India
    • Resolute but not waged a war
    • India showed that to safeguard our interests, we are ready to even step out of our territory
    • India showcassed it might and aspiring status
    • Countered the belief that China can’t be countered
    • Defended our ally Bhutan
    • Prevented from it getting coerced into joining Chinese Orbit
      • Rumpurs of exchange of Doklam for greater are in the North of Bhutan
    • Laid a template for other states, who have witnessed a similar chinese agression, to follow
    • Should discred the Chinese leadership and weaken the leadership
    • A framework to unite countries
      • Japan has supported
      • Other countries like Vietnam, Indonesia, Phillipines have had differences, and there may be a new Convergence of interests
  • ” The supreme art of war is to subdue the army without fighting ” – Sun Tzu, Chinese military strategist
  • Similar crisis averted in TUTING, arunachal
  • Why China doing ?
    • Current
      • Elections in CPC – hence a fervor of nationalism
      • Possibly a retaliiation against India , Japan, US coming together ( Malabar exercise)
    • Plan
      • Attempt to choke Siliguri corridor
      • May not have anticipated Indian entry and Bhutanese effective opposition
    • General trend –
      • over ambition – 9 dash line
      • Boost by BRI
      • American Power Vacuum
      • Veil against sluggish growth
  • India’s objections
    • 1988 and 1998 agreement with Bhutan and 2012 with India to maintain status quo
    • Security Implications
      • Siliguri Corridor
    • Coercion of Bhutan, an Indian ally
    • McMohan
      • Connection to McMohan – China insists on 1899 treaty with British but purposely rejects McMohan
  • Standoffs
    • Doklam – Largest stand off since 1986
    • Others
      • Daulat Beg Oldie
      • Chumar in Ladakah
      • PANGONG TSO lake
    • Other strategically important points – But no standoff
      • Chumbi Valley in China – the valley connecting with India – issues- Siliguri corridor, Difficulty of Indian forces in manouvering in the region due to difficult terrain, Nathu La Paas nearby – Although there has
      • Tawang
      • Shaksgam Valley – That Pak ceded to China
      • Siachen
  • Other learnings
    • Border Infra growth

India – Border roads on India China border – CAG – only 35% completed

  • Other irritants
    1. Border
      1. Dokalm, McMohan, Siachen, Tawang , Shaksgam Valley
      2. Western Frontier – India says that Johnson line is the real boundary which China claims the McDonald Lines to press its claims over Askai Chin
      3. Eastern Frontier – McMohan Line
        • China accepts the McMohan line itself as the border between china and Myanmar
  1. Pakistan
    • 45 billion dollars CPEC through PoK
      • and control of Gwadar port
        • As well as deployment of Chinese navy allowed
    • Shaksgam Valley
    • Massod Azhar
    • NSG, UNSC at Paks Behest
    • Allegations of Nuclear Tech trasfer, Missile transfer, other millitary sales – eg JF 17
  1. String of Pearls
    1. Long term port contacts
    2. Hambantota
      1. Hambantota also shows the vested Chinese design of forcing a country into political dependence
    3. Kyaukyu in Myanmar (Pneumonic – Kya Kyu ??)
      1. Sittwe just nearby
      2. But is much smaller
    4. Chittagong in Bangladesh
    5. Maldives
      1. Signed FTA recently
  2. Stapled visa to Arunachal
  3. Cyber
    1. Hacking
    2. Chinese companies such as Huawei have been accused even in the US
  4. River Water Dispute
    1. Creation of Dams in Brahmaputra
  5. Dalai Lama
  6. OBOR
  7. Trade Imbalance
    1. Trade deficit of 45 billion $
    2. Main reason
      • India exports labour intensive low tech, raw materials like cotton, minerals
      • China does value addition and sells goods like 3Es electronics (Electronics largest export from China to India )
      • Artificially devaluated currency
      • State led distortion in land, labour market
      • Restrictions on Indian pharmaceutical, services export
      • Recent ban on iron ore exports
      • It is a structural phenomenon. Not just with India
  8. China Nepal
  9. One China Policy
    1. Recognition of Tawang
  10. China wants India to accept the political and economic disparity
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Convergence

  • No bullet has been fired since 1967
  • Political
    • BRICS, SCO, BCIM
  • Reforming financial institutions
    • India and China suffer from the distorted mandate in US led Bretton woods institution
    • This led to BRICS bank and AIIB , Quota reforms in IMF
  • Economic
    • Modi “China is the world’s factory while India is the world’s back office
    • Trade at 70 billion $
      • One of the largest, varies depending on the world. Ocassionally, US, UAE take lead
    • Sister cities in Smart city
      • With Bangalore, Hyderabad & Ahmedabad
  • Security
    • Manner in which Doklam Crisis was resolved Peacefully
    • A hotline between the 2 army headquarters will be established to resolve confusions
    • Terrorism
      • China – Suffers too in Xingxiang Province
      • Recent BRICS deration in Xiamen – Calls for Pak to put greater pressure on Terrrorists operating in Pak
  • Global trade
    • Both part of G33
    • India and China both face the challenge of western minded WTO
    • China initially supported India about her reservation on agriculture subsidy
  • Climate commitments
    • Both believe in CBDR to true extent
    • Formed like minded group (LMG) to press for the cause
  • S&T
    • A recent agreement for cooperation in the space research between the 2 countries
  • IDEA OF PEACE
    • PANCHSHEEL

What to do more ?

  • The above Convergence issues
  • DGMO level hotlines agreed I 2015 needs to be expedited
  • Border Infra
  • Backchannel talks
  • Both countries should follow the SPIRIT of Border Defence Cooperation Agreement of 2013
  • Arms
    • India should HOPE for the BEST and PREPARE for the WORST- CONCLUSION

OBOR

One belt, one road – Now called BRI – Belt and Road Initiative

29 HoS in BRI inaugration

Challenges to India

  • CPEC through PoK
  • Issues to India
    • Accepting of OBOR Formal legitimization of PoK – Gilgit Baltistan
    • May mean greater exploitation of the Baloch people
    • Fear that the part could be transferred to China just like shaksgam valley in 1963
    • String of Pearls
      • Esp India is anxious about the Chinese Naval presence at the Gwadar Port
    • Medium to provide funds to Pak Millitary
      • Pak based industries complaining of missing out
    • New Colonisliam
      • Debt problem
      • Environment issues
      • India also complains of Lack of Transparency
      • Local Population opposition
        • Large Dams planned – 7k MW – Dispacement of People
        • Environemtn Issues – EU changed the joint statement
    • Leads to leveraging of countries and may cause permanent Chinese dependency
      • Hambantota in Sri Lanka
    • Indian Eonomic Competitiveness
  • CPEC being extended to Afghanistan
    • Reasons
      • Genuine – To clear Xingjiang region of Terrorism, make CPEC economically viable, and also provide CPEC better shield by involving Afghan
      • De Facto – String of Pearl, Chinese global outreach ( also is trying to broker peace in Myanmar with Rohingyas )
    • Impact on India
      • China – String of Pearls, and Chinese Economic Diplomacy
      • Pakistan may influence the Indian policy of Afghanistan
  • Isn’t India going to isolate economically ?
    • In contrast -after Indian stance, many European countrires, Sri Lanka, Tanzania etc are reconsidering their stance
    • Maybe
      • 29 HoS participated
      • Even US, Japan sent resentratives
      • Participation of Neighbours like Myanmar, Pak, Ban, Nepal
      • India will have to fund through AIIB
      • UN secretary general also cxalled for India
    • Not so much.
      • Write Convergence of interests with China
      • Convergence of Interests with other countries like US, Europe and Japan who have shown Ambivalance to China
      • Other alternatives
        • Japan
          • India, Japan – ASIA AFRICA GROWTH CORRIDOR – being worked out
          • Will focus more on Small Industries like Pharma, Food Processing though instead of Infra project like China
        • Project Mausam , IORC, BIMSTEC
        • May Cherry Pick parts of OBOR
          • Like Maritime Silk Road
        • INSTC, SCO,
        • Trans Asian Railway – ITI – DKD
  • Plus, joining it may mean Chinese workers, Chinese terms and conditions and Chinese debt which may not be very favourble to India
  • We may continue to enjoy certain benefits
    • Terrorism down with Development in Pak, Xingjiang
    • Profit via AIIB – since India 2nd largest shareholder
    • India can use the infrastructre to expans connectivity with Central Asia
  • Even if there is, I think it’s a price worth paying for to defend Indian sovereign interests and India standing on its own feet shoulg go as a message of Superpower in Making
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Benefits to China

  • ” The supreme art of war is to subdue the army without fighting ” – Sun Tzu, Chinese military strategist
    • Africa, Phillipines, Pakistan
  • Marshall Plan of China
    • Outreach at a time when Trump is using isolationist policies
    • May become the 1st superpower to become so without using military might as Britain or US did
    • So west is seeing de-globalisation, and seemingly China and the East are filling that gap
  • Malacca Dilemma
  • Economic
    • Fiscal Stimulus – Currently Growth at 6.5%
    • Trnsportation cost – New Economic Geogrphy – Krugman – Competitiveness of Chinese Firms

Cost

  • 150 billion $ from China expected
  • Largest in CPEC
  • Also imp in Myanmar, Ban, Nepal, Venezuela, Saudi

History of China

  • During Deng Xiaoping ( the moderniser ) , philosophy was ” to hide our capabilities and bide our time and never claim leadership”
  • And now it’s philosophy is ” winning without fighting”
  • Chines policy wrt India recently
    • China views India as a swing state that can move towards US, or towards China, depending on the incentives
    • Thus, of recent China has been approaching India
    • Has offered membership of Shanghai Cooperation Organisation & APEC

Chinese Ambassador to India pointed areas where cooperation can be increasde

  • Opening up trade office in Lhasa, at the place where India’s Consular Generla office used to exist till 1962
  • FTA
    • But, FTA can’t be goods centric
    • Must be tilted towards services and IP
  • Air connectivity from New Delhi to Xingjiang
    • Would boost trade and more importantly counter – terror operations
  • Resolve Border issues
  • India part of OBOR

Indian policy

  • “Part engagement , part containment”

Tibet

  • 1,20,00 Tibet refugees in India
  • Violence in the region could push more while increasing millitary confrontations
  • India could pave a middle path for Tibet by seeking greater autonomy on the lines of Hong Kong, Macao

South China sea problem

  • Paracel Islands, Spratly islands, Scareborough Shoal
    • Countries involved – China, Taiwan, Phillipines, Indonesia, Brunei
    • China claims all the island chains within the 9 dash line
    • China is building artificial islands on the Mischief Reef , Subi Reef etc
  • Woody Island a island occupied by China, but also claimed by Taiwan & Vietnam was recently militarised and China installed a SAM
  • Why important
    • South China sea expected to contain vast crude oil and natural gas reserves
    • Strategic Signalling
    • Major trade route passes through it
      • China will be able to make it secure
      • And dirupt that of others
    • India
      • Vietnam Oil exploration
      • Repurcusions on the Indian border
      • Environment
      • Coalition against China

Malacca dilemma

  • Issue
    • Most of Chinese energy supplies/ goods to trade pass through the Strait of Malacca
    • Problem- This is secured by the American Forces (around Singapore)
    • In the event of tussle with US, India,… This Sea Line of Communication (SLOC) can be closed
    • Just as Suez was shut to Israel after the war of 1967 with Egypt
  • Circumventing startegy
    • Oil pipelline through Myanmar
      • Will send oil from Indian ocean to China via Myanmar without requiring Malacca
    • Chinese naval exercise in the Lombok strait near Indonesia, which provides alternative route
    • Economic collaboration with the smaller island countries of Indian ocean theough the Maritime Silk Route
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CHINESE ECONOMY (Eco -2)

Why growth in China ?

  • Liberalisaton by Deng Xioping
  • Reversal of cultural revolution – private enterprenership again
  • Financial reforms in the rural side- Led to growth of private enterpreneurship in the rural areas – eg no collateral required for loans
  • Givt prices
    • Artificially keeping labour prices low
    • Depreciated currency
    • Infusion of technology
  • Simultaneous invesment in infrastructure

Success

  • Wrt India
    • In 1960s China had a lower GDP than India
    • Overtook India in per capita in 1990
    • Higher HDI index
  • According to IMD, the baton for “engine of growth” of global economy shifted from US to China in 2006 (% share in rise in GNI of world )
  • 2nd largest economy, PPP at 13 trillioon $

Timeline of events since financial crisis

  1. Pre Financial crisis
    1. Export dependent
    2. Current Account Surplus 10% of GDP (:P)
      1. Now 2% 😀
  2. Financial shock
    1. Growth led model could possibly collapse
    2. Hence need to look inwards
  3. Post Financial shock
    1. Need to shift structurally from export driven to domestic consumption led a
      1. Massive 600 billion $ stimulus programme
      2. Massive investment in infrastructure at home
      3. Local/Provinvincial govt follow a Deficit Financing Stimulus
      4. Also builds up a bubble in real estate and share market
        1. Possibly because of shift in investor capital
    2. Need to focus on the Developing countries
      1. Built NDB, AIIB for better returns and monetary support
      2. Slew of infrastructures – Silk Road Belt, Maritime Belt, String of Pearls
      3. Bilaterally- China- Russia 400 billion $ gas deal, 45 billion$ in Pak, expansion in Africa (data required)
    3. Need to make renminbi as a vehicle currency by including in SDR
      1. Made it more market oriented
      2. Yuan allowed to appreciate by 25% since 2007
      3. That is why surplus also dropped to 2% of GDP
      4. Update – Renminbi included as a SDR
        1. Benefir for India- Renminbi will be market driven and is less likely to remain undervalued
      5. Triffin Dilemma
        1. Says about the cons of a currency becoming global
        2. It can truly become global if it has a Current Accunt Deficit CAD
        3. So that the currency supply is large and it becomes widely available – by paying for the imports
  4. Benefit
    1. Short term
      1. Helped get back to the 10% growth levels quickly
      2. Inward expansion- domestic consumption arguably more sustainable
    2. But,
      1. Debt problem with provinces
        1. The total loans at risk stand over 600 billion $, a value that triggered the subprime mortgage crisis in the US in 2008
      2. Speculative bubble in share market
        1. Share market collapsed in 2015
      3. GDP down to 7%
      4. Structural issues
        1. Rising wages
          1. 4 times as much in India
        2. Demographic window closing as population slows
          1. Hence, 1 child policy has been relaxed
        3. Xi’s crackdown on corruption can slowdown spending in the Short run